The Legal Corner: The Questions Most Business Owners Never Think to Ask

You Have an Attorney. But Are You Using Them for the Right Things?

Most business owners have worked with an attorney at some point. Usually it was to set up the business entity. Then it was done. That was the relationship.

What they don't always realize, past inception, is how much is left on the table. Entity structure, liability protection, benefit plan, exit strategy, estate planning — all of it falls under the legal corner of a business owner's plan. And if nobody's coordinating that piece with the rest of the advisory team, the gaps quietly compound.

What Does a Business Attorney Actually Do?

The legal corner of a business owner's plan covers a wider range than most people realize. Brian Hartstein breaks down several of its distinct functions: operational legal work that helps the business run; risk and liability protection while the business is operating; wealth accumulation planning, including family trusts and ownership structures; exit planning when the owner's ready to transition or sell; and estate planning for what happens after.

The mistake most business owners make is assuming that one attorney covers it all. Sometimes that's true. Often it's not. An attorney who helped you set up a revocable trust may not be the right person to advise you on navigating exit planning prior to a business sale. Knowing the difference can matter.

Entity Structure: The Question Most Business Owners Skip

Whether you're operating as a sole proprietor, a single-member LLC, an S corporation, or across multiple entities, the structure you're in has real consequences for taxes, liability, benefit planning, and your eventual exit. Andrew and Brian walk through the most common gaps they see with business owner clients.

One of the most overlooked situations: business owners who set up their base entity years ago and never had it reviewed. The structure may have made sense at the time of formation. It may not make sense now. A sole proprietor who's been operating that way for years might be able to save meaningfully on self-employment taxes by simply moving to a single-entity structure. The review itself is often inexpensive relative to what it uncovers.

Single Entity vs. Multiple Entities: How Do You Know Which Is Right?

There's no cookie-cutter answer. The right structure depends on your lines of business, where your profit centers are, what you own, and what you eventually want to do with the business. Brian points to a few situations where multiple entities are often worth exploring.

If your business owns the building it operates in, separating the real estate into its own LLC is a conversation worth having. The reasons include liability protection, depreciation planning flexibility, and what happens at a business sale. Buyers in a private equity transaction typically want the operating business, not the real estate. If both are inside the same entity, separating them at sale becomes a tax problem that could've been avoided with the right structure in place earlier.

Hard hat industries like construction and manufacturing often have multiple lines of business running inside one entity. That's a natural candidate for restructuring. Service businesses, including legal, medical, and architecture, have their own layer of rules called affiliated service group rules that affect what benefit planning is possible across entities.

Corporate Structure and Exit Strategy: These Decisions Connect

The entity type you operate under today affects the options available to you when you're ready to exit. Brian walks through two scenarios that often arise in exit-planning conversations with business owners.

There are provisions in the tax code that may create certain advantages depending on how your business is structured and how a future sale is handled. These aren't strategies you can layer in at the last minute. They require the right structure and team to already be in place, which means the time to think about them is well before the sale is on the table.

For business owners who want to understand more about how ownership transitions work, our podcast interview on the exit playbook for business owners with Scott Snider and the Four Corners framework overview at Episode 122 are good starting points.

How Often Should a Business Owner Be Talking to Their Attorney?

Attorneys are often event-driven. They're not built to sit in a monitoring role the way a financial advisor is. Generally, attorneys' billing practices will prevent them from being used in a monitoring capacity. Not that we don't like them, but generally this will be cost-prohibitive.

What Andrew and Brian recommend instead is to ensure your advisory team coordinates the legal aspect so you know when to bring in the attorney. The financial advisor should be the one driving the overall strategy and identifying when a legal question needs to be answered. When it does, you don't want to be scrambling to find someone you trust. That relationship should already exist.

How to Find the Right Attorney If You Don't Have One

Referrals from your CPA or financial advisor are usually the best starting point. If you need a specialty like ERISA law, exit planning, or a specific industry niche, your existing advisory team will often know who to call. The legal landscape has shifted in recent years. Larger firms now often have marketing-focused attorneys whose job is to connect business owners with the right specialist inside their firm, which makes it easier than it used to be to get pointed in the right direction.

Smaller specialty firms in the Phoenix and Scottsdale market can also be a strong option, particularly for business owners who need focused expertise in areas like ERISA, entity structure, or exit planning strategy. The key is matching the attorney's specialty to the actual need, not just using whoever is closest or most familiar.

Disclosure: The content on this page is for informational and educational purposes only. Bayntree Wealth Advisors and its representatives do not provide legal or tax advice. Nothing on this page should be construed as legal or tax guidance specific to your situation. Any references to tax code provisions, entity structures, or planning strategies are general in nature and may not apply to your circumstances. Please consult a qualified attorney and/or tax professional before making any decisions about your specific situation.